Q&A: Credit scores and new accounts

Dear Liz: My spouse signed up for a store credit card to receive a discount on a large purchase. As she has no strong interest in maintaining a line of credit there, is there a simple way of discontinuing this account without affecting our credit scores, given that we may apply for a mortgage in the near future?

If not, is it critical we maintain some frequency of use on this account?

Answer: First, let’s correct a popular misconception that marriage somehow combines your credit records. Assuming she applied for the card in her name alone, this account won’t show up on your credit report or affect your scores.

Should you apply for a mortgage together, however, her scores could affect the interest rate and terms you get. Opening and closing accounts can ding scores, so it’s best to avoid both when you’re in the market for a major loan.

Issuers vary in their policies on closing inactive accounts, so it’s hard to predict how much activity would prevent the card from being shut down. Typically, though, a small charge every two to three months is enough to keep an account open.

Comments

Comment re Credit scores and opening and closing of small accounts. A while back I examined the credit report of a prospective tenant (now a current tenant) with a very high score (above 800) and she had a number of these small accounts that she had opened, used just once, paid off, then left them open. It was pretty clear that she had done this just to get the the discount on her one purchase. Most were still open and they did n0t appear to negatively impact her score in the least.

A caution, though, about the impact of 24 month 0 percent financing offers on your credit score. A couple of years ago I purchased a very expensive appliance and took advantage of such an offer. I could have paid cash, but I thought, what the heck. The store issued me a credit card with a maximum draw limit equal to the amount of the purchase. A month later I pulled my report and this appeared as a maxed out credit card – which as you have repeatedly stated – had a negative impact on my score. Before I would take advantage of such an offer again, I would insist that the card issued had a limit of at least three times the amount of the purchase, or I would not go for it.